Stephen Walsh, a WG Trading Co. money manager and principal has pleaded guilty to bilking institutional investors of more than $554 million over a period of 13 years. Walsh and EG’s ex-general partner Paul Greenwood were charged in 2009 with allegations accusing them of using the investment advisory firm and commodities trading to perpetuate their scam, which took place between 1996 and 2009. Charities, retirement plans, pension flans, and university foundations were among those bilked.
According to the Federal Bureau of Investigation, the two men raised $7.6 million, misappropriating hundreds of millions for their personal use. They were supposed to put the money in an equity index arbitrage program, which the represented as a conservative trading plan that had done very well for years.
Investors then either got promissory notes from WG Trading Company or became limited partners. Greenwood and Walsh made it seem as if interest would be paid at a rate that was the equivalent of investment returns made by a limited partner.
Unfortunately, in actuality, Greenwood and Walsh misappropriated hundreds of millions of dollars for their own use and to meet obligations on investments that had nothing to do with equity index arbitrage. They also issued promissory notes in part to hide trading losses and their theft. The notes materially misstated WG Trading Company’s financial state.
The men also issued bogus account statements that they sent to clients to make it seem as if there were actual returns. The money that they took went toward paying for cars, horse farms, collectible stuffed animals and other expenses.
This week, Walsh pled guilty to securities fraud. He faces a maximum of 20 years behind bars. He also consented to try of a forfeiture order of more than $50.7 million, which is how much he misappropriated and profited. Securities cases against Walsh by the Commodities Futures Trading Commission and the Securities and Exchange Commission are still pending.
If Walsh’s case had gone to trial then Greenwood, who pled guilty four years ago to commodities fraud, securities fraud, money laundering, and wire fraud, would have testified against him later this year. He not only agreed to forfeit at least $331 million to the US government for money procured from the fraud, but he consented to pay another $83.5 million for proceeds that he “personally obtained” because of the scam.
Also, in 2009, WG Trading Company’s ex-chief compliance officer Deborah Duffy pled guilty to securities fraud, conspiracy, and money laundering for her involvement in the scam. The FBI’s website says that Greenwood and Duffy have yet to received their sentences.
At The SSEK Partners Group, our securities lawyers are committed to helping institutional investors get their securities fraud losses back.
Investment Manager Principal of WG Trading Company LP and WG Trading Investors Pleads Guilty in Manhattan Federal Court to Role in Several-Hundred-Million-Dollar Fraud Scheme, FBI, April 25, 2014
WG Trading’s Walsh Guilty in $554 Million Investor Scam, Bloomberg, April 25, 2014
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